What factors affect the demand of mobile telephone products? Sample Essay

This undertaking is about analyzing the factors impacting the demand of nomadic telephone merchandises. The instance survey that will be included is the current province of the UK nomadic telecommunications market. The operators to be examined are the four major operators in the United kingdom: BTCellnet. One2one. Orange and Vodafone.

The instance survey for this undertaking will be based on the current province of the UK nomadic telecommunications market and the public presentation of its four consumer operators.

Before this can be discussed. it is of import to understand how nomadic telephones have developed over the past decennary. Up until about six old ages ago. peoples mobile telephone calls were carried over linear transmittals. Analogue transmittals are radio moving ridges. as received by a normal wireless. Due to their basic nature. parallel Mobile phones where non really unafraid and they could be “cloned” easy by hackers who wished to do free calls. Because of these reverses. nomadic telephones stayed chiefly in the custodies of concerns. which needed to reach their employees and didn’t worry about the cost. About six old ages ago. digital nomadic phones came onto the market offering a new manner to pass on whilst on the move. Prices went down as the demand for digital Mobile telephone went up and nomadic phones became more and more popular.

It is really of import to observe that the UK mobile telephone market is instead alone in the international Mobile industry due to the fact that there are merely six operators ( TIW/Dolphin. BTCellnet. One2one. Orange. Virgin Mobile and Vodafone ) . merely five of which offer services for the consumer and merely four of which operate their ain web ( Virgin Mobile runs over the One2one PCN web ) . This means that they can run about as a trust in that they can stay powers in the industry whilst maintaining their monetary values comparatively stable.

( This undertaking will non include the effects to the UK Mobile industry that have occurred due to the add-on of Virgin Mobile to the consumer’s pick of operators. TIW/Dolphin will non be covered either because they do non play any portion of the consumer portion of this industry. )

Results & A ; Findingss

Figure 2. 1: Mobile Growth: % of Adults Who Have a Mobile Telephone

Figure 2. 2: Penetration of Mobile Telephony in UK Homes

Figure 2. 3: Mobile Penetration: United kingdom Adults.

Figure 2. 4: % of Mobile Users Using Each Network – Survey Sample ( May 2000 )

Figure 2. 5: Profile of Mobile Package Use


The graphs in the Results & A ; Findings subdivision will foremost be analysed one by one:

Figure 2. 1

Despite this graph’s big proportions of grownups having nomadic phones. it is clear to see that there was a dramatic addition in nomadic phone ownership from January 1999 to January 2000. You can besides see that it is still increasing. lifting about 2 % each month. This is most likely due to the lessening in nomadic monetary values. and more significantly the monetary value of line lease and the existent call costs.

Figure 2. 2

Over the old ages the figure of places without a fixed or nomadic phone has decreased. even though it was non that high in May 2000. There are comparatively few places with merely a nomadic phone. nevertheless this per centum has increased from 5 % . May 2000 to 7 % . February 2003. The bulk ( 76 % ) of places ain both a fixed and nomadic phone. this per centum has besides increased a batch since 2000. This is a large issue for nomadic telephone operators looking at replacing fixed lines. There is no existent demand ( other than monetary value ) to hold a fixed line alternatively of a nomadic phone – the lone thing halting people exchanging over to nomadic phone-only is the cost of calls and line lease ( the cost of the phone is normally reduced to nil when subscribing up for a contract duty ) . However. the antonym of nomadic phones is the fixed line. which is more appealing to consumers wishing to do phone calls from their abode. The costs of calls for fixed lines have gone down significantly and nomadic phone calls are still more expensive.

Figure 2. 3

Ownership of nomadic phones with grownups populating in the UK is half the population. but this includes the 15-24 bracket which contains the bulk of adolescents. who it is now said purchase more nomadic phones since the debut of “Pay As You Talk” pre-pay bundles into the market. In this bracket. 66 % own a nomadic phone.

It is easy to see from figure 2. 3 that the bulk of members of the population in the highest income-bracket. marked ‘Over ?30k’ on this peculiar chart. have a nomadic phone. and this was expected due to the disbursal of nomadic phones. Whilst their monetary values have lowered in recent old ages. they are still considered by most of the population to be excessively expensive to have.

Figure 2. 4

This chart shows that despite Orange being the market leader ( with Vodafone coming second ) . the other 3 webs are closely following. In fact. Orange merely have an excess 1 % compared to Vodafone. This equality amongst the operators is due to the state of affairs mentioned above ( in the Case Study subdivision ) of merely four rivals in the whole industry. This is non truly needed in this undertaking because it is non a factor impacting the demand of nomadic phones. although it does impact the monetary value to the consumer.

Figure 2. 5

Here we can see that the prima bundle type in the UK is the comparatively new Pre-pay bundle with a 71 % portion. Feb 03. Even though there is no grounds here. the bulk of consumers who own a Pre-pay bundle are under 18. This is mostly due to the fact that immature people can non subscribe the contract necessary to hold a monthly-billed phone and a pre-pay bundle is the merely other option. It is besides due to the debut of nomadic phones into adolescent manner.


From the information gathered and put frontward above. the undermentioned factors can be seen to be the chief factors impacting the demand for nomadic phones:

*Cost. to the consumer. of having a nomadic phone.

*Cost of the nomadic phone’s replacement. the fixed line.

*Fashion position of nomadic phones.

Cost. to the consumer. of having a nomadic phone

This is chiefly to make with Demand & amp ; Supply although the cost itself is affected by the UK mobile telephone Market and its Competition so those theories will be mentioned s good.

Demand & amp ; Supply and Elasticity of Supply

The cost to the consumer is affected by both the demand and the supply of nomadic phones and the web services that operate them. Now that the operators’ digital webs are runing at the highest efficiency with coverage over about all of the UK. the monetary value of runing the web is reasonably low for the operator so the net income border on line lease is really big. However. this net income border is brought down somewhat due to the subsidies paid by operators on nomadic phones when purchased with one of their duty bundles. The cost of the Mobile phone itself is rather low. due to the low monetary value of the parts required to do them. This means that there is still a high net income border and hence the operators are willing to provide nomadic phones and services at virtually any sensible monetary value. This consequences in a supply curve similar to this:

The demand. nevertheless. is instead different. Because of the willingness to provide. doing the shallow supply curve. the operators have provided low monetary values for consumers and as a consequence the demand for them has risen dramatically as you can see in figure 2. 1. However. the ownership merely a twelvemonth ago was much less due to the higher monetary values. Therefore. we can add a demand curve to the diagram that looks like this:

As you can see. the equilibrium monetary value ( P1 ) is still comparatively high and this reflects the high cost of calls compared to the nomadic phone’s replacement. fixed lines. Despite it being cheaper to utilize a fixed line. consumers are still more than willing to pay for nomadic phones.

The Market. Competition and Monopolies

As mentioned above. the monetary value of nomadic phones is besides affected by the Market and the rivals within that market. The UK mobile telephone market is known as an oligopoly. which means a market with merely a few Sellerss. As a consequence. the few Sellerss can run monetary values and other market factors to their advantage. This besides gives the visual aspect of a trust or price-fixing understanding in operation. The purpose of trusts and price-fixing understandings is to maximise joint net incomes and act as though the market is a pure monopoly. This definition fits this market about absolutely because all four operators manage to continue a more or less equal market portion and their net incomes are high due to their monetary values being every bit high. Of class. it is of import to gain that this is merely suited to name costs and the web services since the nomadic phones themselves are non produced by the operators but the electronics companies. such as Nokia. Ericsson and Sony.

Some economic experts believe that price-fixing trusts are unstable and that they will go under force per unit area and finally interrupt down. This has evidently non happened yet. the marks of this theory coming true are now get downing to demo. One of the grounds economic experts give for the dislocation of trusts is the entry of a non-cartel house into the industry. which increases market supply and. puts downward force per unit area on the trust monetary value. With the debut of Virgin Mobile. a non-cartel house in this state of affairs. in the UK mobile telephone market. the monetary value of Mobiles is bound to come down since the Virgin Mobile monetary values are a batch lower than those offered by other operators. A farther job for the “cartel” members is the fact that Virgin Mobile offers pre-pay duties merely and yet the monetary values are lower than those offered by many contract duties available at the minute.

Cost of the nomadic phone’s replacement. the fixed line

Fixed line suppliers. chiefly BT and the overseas telegram operators ( NTL. which antecedently included Cable & A ; Wireless and Telewest ) . are non in direct competition with nomadic phone operators yet. due to the big difference in the monetary value of calls. Mobile phones have the obvious advantage as they are portable. and this is what has allowed its operators to coerce higher call charges than their fixed line opposite numbers. This could good alter in the hereafter as the monetary value of nomadic phone calls are driven down by the debut of Virgin Mobile ( as mentioned above ) .

Manner position of nomadic phones

Elasticity of Demand and Costss

This ne’er used to be an of import factor in the demand for nomadic phones but with the addition in ownership by adolescents ( due to the increased handiness of pre-pay bundles ) it has been made one of the operators’ chief concerns. The teenage market for nomadic phones is dining and because of this the demand for nomadic phones has become more inelastic.

The demand was antecedently elastic. An addition in monetary value resulted in a much larger lessening in measure demanded. This means that earlier. consumers were more witting of the monetary value they paid and were unwilling to stand for big monetary value hikings. Now. the demand has become much more inelastic. The same addition in monetary value consequences in a much smaller lessening in measure demanded. intending that people. chiefly the teenage market. are less cognizant of the monetary value and are willing to stand monetary value additions. However. at the same clip supply has increased. This is chiefly down to developments in nomadic engineering significance that mass production of nomadic phones has become cheaper and more cost effectual. At the same clip. supplying the nomadic telephone service has gone down in monetary value due to the fact that the webs running in the UK need really small development now that they are established. This addition in supply brings the monetary value down every bit good as increasing the measure supplied at the equilibrium.


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